What happened

After reporting fourth-quarter earnings that came up short of expectations, shares of Aratana Therapeutics (NASDAQ:PETX), a biotech company focused on pet health, fell by 21% as of 1:40 p.m. Tuesday.

So what

Here's a review of the headline numbers from the fourth quarter:

  • Revenue for the period came in at $292,000, which was primarily generated from sales of the company's drug Nocita. This compound became commercially available in late 2016 and is used as a local post-operative analgesia for ligament surgery in dogs. By contrast, Wall Street was expecting $923,000 in total revenue for the quarter.
  • Net loss was $23.3 million, or $0.64 per share. This figure was much higher than the $12.9 million net loss that was recorded in the year-ago period and also exceeded the $0.43 loss that analysts were expecting. However, it is worth noting that the company recorded a $10.7 million writedown on inventory and intangible assets during the fourth quarter.
A man stacking coins in taller piles from left to right.

Image source: Getty Images.

And for the full year 2016:

  • Total revenue was $38.6 million. A large majority of this total was generated from a substantial upfront payment related to the collaboration agreement with Elanco Animal Health, a division of Eli Lilly.
  • Net loss was $33.6 million, or $0.95 per share. The total impairment charges for the year were $15.1 million.
  • At year end, Aratana's cash balance was $88.7 million. Management believes this will be enough capital to fund operations through the first quarter of 2018.

The lower than hoped for quarterly sales and higher than expected loss appear to be the primary reasons behind Tuesday's drubbing.

Now what

This is the second time this quarter that Aratana's stock has taken a big plunge. Shares also dropped in early February after management said the FDA's Center for Veterinary Medicine wanted more information related to the company's transfer of its drug Entyce to a new manufacturer. The request is expected to delay the drug's launch until late 2017, which means it is going to take Aratana more than a year to bring this drug to market. That's not good news for any company, let alone a cash-strapped, small-cap biotech.

With losses continuing to pile up, Aratana is likely going to have to raise capital sometime soon. Given the stock's recent drubbing, hitting up shareholders for extra cash is likely to be an unappealing option. That makes me think potential investors should remain on the sidelines until we know more about the company's financial plans.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.